The widespread adoption of artificial intelligence (AI) has triggered a new era of transformation within the retail sector. The technology, already eagerly adopted by digital disruptors, is now impacting physical retail channels, revitalizing business models, and increasing margins, as well as boosting efficiency and productivity levels.
The World Economic Forum forecasts AI will significantly reduce sector-wide business costs, improve loss-prevention efforts, and optimize supply chains.1 In fact, the sector is forecast to grow from $9.36 billion this year to $85.07 billion by 2032.2
A new era of conversational commerce
AI is also poised to transform customer experience by elevating the quality of so-called ‘conversational commerce’.
Forget the clunky chatbots of the past. Retailers are harnessing Generative AI to create virtual assistants capable of conducting human-like interactions with customers, answering complex queries, recommending products and services and delivering increasingly granular personalized experiences.
Mikhail Tolmachev, EPAM’s Director of Data and Analytics, says: “We recently created a customer-facing Generative AI-powered chatbot for one of the world’s largest premium vehicle brands. The brief was to enhance and expand the company’s after-sales service. Our solution enables the brand to automatically interact with customers in real-time and at scale, carrying out tasks, such as arranging servicing appointments.”
Tolmachev explains that EPAM carefully controlled project costs for its client, managing the use of neural networks and expensive GPUs. It also analyzed chatbot outputs to generate a list of frequently asked questions, which replaced costly AI data calls in many instances.
Exciting new business models beyond our imagination
AI adoption will not only transform existing retail practices, it will create completely new business models, beyond our imagination, says Martin Ryan, VP of Retail Europe at EPAM.
He draws parallels with the e-commerce revolution of the late 1990s and the rise of aggregator business models used by digital disruptors such as Amazon, Airbnb and Uber.
“It’s impossible to say what these new AI business models will be, but they will be highly disruptive for both brands and retailers,” says Ryan.
“We can be sure, however, that AI will enhance the data flows between brands and customers. AI will alert brands in real time about emerging customer demand and these insights will be quickly absorbed into product design, advertising and marketing processes, dramatically accelerating time-to-market.”
Retailers must defend market share now
The rapid commoditization of AI is great news for retail start-ups, but it poses a significant threat to market incumbents who risk increased competition from digital-native retail adversaries.
One big advantage sector incumbents enjoy, however, is the large volume of data at their disposal – a critical ingredient for AI transformation.
David Billings, EPAM’s VP of Digital Marketing Solutions, says established retailers wishing to preserve market share must “build a digital moat around their business”.
“Just like the social networks did two decades ago, established retailers must leverage the data they’ve accumulated over years, so they can understand and get closer to their customers.” Billings cautions that there is little time to waste. “They need to start digging that digital moat now, while they’re still ahead, otherwise they risk losing their advantage,” he says.
Get in touch to discover how EPAM can help you develop an AI strategy that delivers retail business value.
2Artificial Intelligence [AI] in Retail Market Size & Growth, 2032 (fortunebusinessinsights.com)